By Marc Jones and Chris Mfula
LONDON (Reuters) – Zambia's Securities and Exchange Commission (SEC) has sanctioned Standard Chartered (OTC:) for improperly selling bonds of a Chinese property company to one of the bank's local clients at the height of the property crisis. of the Asian country. according to one source.
The source familiar with the matter told Reuters that the UK-based bank, which is currently looking to sell its retail and wealth banking businesses in Zambia, was facing “enforcement action” for two breaches of SEC rules after a months-long investigation.
The first was that it had failed to disclose “material information” about the bonds it sold in March 2022. Those bonds, issued by state-backed Chinese developer Sino-Ocean, defaulted just over a year later and now, as many in the sector, almost worthless.
In addition, the SEC found that Standard Chartered had also used “exclusionary” contractual clauses, meaning that the client bore all responsibility for the risks, which is against Zambian securities regulations.
In a statement to Reuters, Standard Chartered said: “We respect the outcome of the Zambia Securities Exchange Commission, however, in accordance with appropriate local procedures, we will respectfully exercise our right to appeal.”
“We are fully aware of this matter and are reviewing the necessary details to clarify the situation. It is our priority at the Bank to ensure compliance with regulatory standards in all our markets.”
The SEC, which began its investigation into the case in April, said it could not comment on the matter when asked by Reuters. Under the Zambia Securities Act, Standard Chartered now has 30 days to file its appeal.
Zambia's SEC has the power to publicly or privately fine or “censure or reprimand” lenders, although it cannot formally order them to compensate customers for mis-selling.
Reuters was unable to establish what penalty the regulator plans to impose on Standard Chartered.
The lender announced in November that it was looking to sell its retail and wealth banking businesses in Zambia along with those in nearby Botswana and Uganda.
It has operated in Zambia for almost 120 years, making it the oldest bank in the country.
However, it is currently reducing its overall footprint in Africa, having also sold its business in Tanzania and subsidiaries in Angola, Cameroon, Gambia and Sierra Leone in recent years.
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